PE Firms Focus on Leadership Amid Longer Holds

- The median holding period for private equity-owned companies has climbed to a record 6.0 years, a significant increase from the 4.4-year average seen between 2005-2014. This extension is now considered the new base case, not an exception. - A challenging exit market is a primary driver for longer holds; while overall exit values rebounded in 2025, liquidity has been concentrated in "mega exits," leaving many mid-market companies stagnant. A sluggish IPO market has limited exit options, increasing reliance on sales to strategic buyers or other sponsors. - With less reliance on financial engineering, value creation now overwhelmingly depends on operational performance. In 2024 exits, for instance, revenue growth was responsible for 71% of value creation, underscoring the need for leaders who can fundamentally improve the business. - The quality of a portfolio company's management is now widely viewed as one of the most critical factors in an investment's success or failure. As a result, PE firms are treating talent decisions with the same rigor as capital allocation. - This focus is changing recruitment, with firms looking beyond executives with purely financial backgrounds for C-suite roles and instead seeking leaders with broader competencies to navigate longer and more complex value-creation plans. - Leadership risk is now being viewed as exit risk. Potential buyers are conducting more intense diligence on the depth and resilience of management teams, not just on the company's financial performance. - PE firms are implementing more sophisticated human capital strategies, such as formal CEO succession planning, executive assessments, and onboarding support to de-risk investments and drive performance over the extended ownership cycle.